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TOP 5 upcoming Hill fights

POLITICO LIVE: Sequestration looms

There’s a growing number of senior Republicans, such as Senate Minority Whip John Cornyn, who are prepared to allow the billions of dollars of automatic spending cuts to military and other domestic agencies take effect without intervention.

Privately, some top Republicans in the House believe the threat of an economy-shaking debt default is off the table — at least for now — as a political weapon for Republicans to extract spending and entitlement cuts from President Barack Obama. That is certain to anger tea party conservatives who want to renew their demands for dollar-for-dollar spending cuts in exchange for raising the debt ceiling again.

If that line of thinking holds, the GOP will focus squarely on two major deadlines to push their demands: funding the government past March 27 and adopting a new budget blueprint by April 15.

“This doesn’t go away,” Sen. John Thune (R-S.D.) said of the GOP’s decision to accept a three-month debt ceiling hike after demanding dollar-for-dollar cuts. “This is a temporary thing.”

But the battle lines aren’t that simple; both parties have internal struggles ahead to determine their priorities and when and how to fight.

Senate Democrats, for instance, now boxed into advancing a budget resolution for the first time in four years if they want to receive paychecks after April 15, need to decide what they want to do on tax reform and entitlements.

A split is emerging between powerful Democrats, such as New York Sen. Chuck Schumer and Montana Sen. Max Baucus, over whether to employ controversial fast-track procedures to pave the way for a sweeping overhaul of the Tax Code that would presumably raise revenue to help slash future deficits. How the dispute is resolved will have dramatic implications for the contents of a final fiscal package.

The dueling House and Senate budget resolutions could force the two parties into a serious policy debate over cuts to Medicare, Social Security and Medicaid — as well as whether to raise new taxes through a reform of the Tax Code — something that was largely avoided in the previous Congress.

How this is resolved will define Obama’s second term in office and whether Capitol Hill can finally get a handle on its finances — or fall into yet another crisis.